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European shares follow Wall Street lower to hit 20-month lows

European shares are in the red Thursday, hitting the lowest levels for some 20 months, after taking their cue from Wall Street’s Wednesday performance. Investors pulled back on riskier stocks, after IMF chief, Christine Lagarde, warned that stock market valuations were “extremely high”.

By 1335 BST, the EUROSTOXX 600 was down 1.28%, while the EUROSTOXX 50 was 0.75% in the red. Regional bourses fared little better. The German DAX lost 0.51%, the French CAC was 1.11% in negative territory and the Spanish IBEX sank 0.69%.

Global growth fears weigh on sentiment

European investors chose to sell off some assets Thursday, following news US stock markets hit an eight-month low, overnight. Sentiment among investors around the world has been hit by increasing fears that global growth could slow – a view exacerbated by the IMF’s latest forecasts.

In addition, Lagarde told reporters at a series of meetings in Bali, Indonesia, that as the pace of global economic growth plateaus, it might not be strong enough to cope with increased trade tensions between the US and China.

“The real question is: Is the economy strong enough? To that, my answer is 'probably not enough',” Lagarde said.

“Moreover, some of the risks that we have highlighted at our spring meetings in April have now begun to materialize, especially from the rising trade barriers,” the head of the IMF added. “If these tensions were to escalate, the global economy would take a significant hit.”

These comments, following on from the official forecasts, have helped bring a big dose of reality to investors and the stock markets, resulting in a clear decline in prices.

Stock movers

Against that backdrop, there have been some stock movers of note, so far Thursday.

BMW shares are 0.45% lower at €75.01, after the German carmaker announced plans to increase its stake in its China joint venture with Brilliance Motors. BMW will also invest some €3 billion in the business to improve and expand its production capacity.

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